Mumbai: Shareholders of Kasturi and Sons Ltd, the publisher of The Hindu newspaper, are believed to be in talks with Australia’s Fairfax Media Ltd for a possible sale of a minority stake in the Chennai-based company, a first for the 130-year-old, family-owned group.
The financial details of Kasturi and Sons could not be obtained as it is an unlisted and closely held company but, based on its Rs450-500 crore advertisement revenue, the group could be valued at Rs2,600-2,800 crore, according to some media analysts.
Going by this valuation, a potential 26% stake sale, the maximum permitted under India’s foreign direct investment (FDI) laws for the print media, would fetch the company Rs676-728 crore. Specific terms of the discussions couldn’t be ascertained.
Both Kasturi and Fairfax denied any potential deal but, insiders close to Kasturi’s shareholders and some media analysts said the discussions are indeed on and the senior executives of the company, which also publishes The Hindu Business Line, have been visiting Australia at regular intervals.
Fairfax’s executive for investor relations, Frank Sufferini, when asked about the meetings with members of the Kasturi family, said the company “regularly undertakes discussions with other media companies around the world…” but there are “no plans to make an investment in The Hindu Group.”
“These are speculations,” said Kasturi and Sons joint managing director N. Murali.
Editor in Chief of the group, N. Ram passed a similar query to Murali.
Mint could not independently verify whether the talks are still going on.
The Hindu Group of publications, which also includes the fortnightly Frontline, and a sports weekly Sportstar, is facing new pressures with the industry going through significant changes.
Newsprint prices have gone up more than 35% in the past seven months, journalists’ salaries have increased multifold, and media giant Bennett Coleman and Co. Ltd (BCCL) has just launched its daily, The Times of India, in Chennai.
For Fairfax, capitalized at A$5.10 billion (Rs18,907 crore) on Australian bourses, a potential deal would give it access to the Indian media sector, which boasts of the largest and fastest growing audiences globally. The group is the publisher of The Sydney Morning Herald, one of the oldest Australian newspapers, and also owns an array of media assets in New Zealand and the US.
More recently, Fairfax has been aggressive in growing through mergers and acquisitions. In 2007, for example, after buying another Australian publisher Rural Press, Fairfax acquired the radio assets of Southern Cross Broadcasting to take its footprint beyond newspapers. Rural Press runs a large group of agriculture-focused newspapers and magazines in Australia, New Zealand and the US.
Kasturi has focused primarily on southern India ever since Kasturi Ranga Iyengar, The Hindu’s legal adviser, bought the company for Rs75,000 in 1905.
For about a century, the company has dominated the English newspaper market in southern India and carved a niche circulation for its detailed political and grass-roots coverage, while rivals such as The Times of India (TOI) and the Hindustan Times stayed focused primarily on the north. Mint is published by HT Media Ltd, which also publishes the Hindustan Times.
The changing dynamics in the Indian news industry could have compelled the group to change track, said media analysts.
With TOI’s launch in Chennai, a big share of the advertisement revenue would be diluted for other print players in Tamil Nadu, said Abneesh Roy, a media sector analyst at domestic brokerage Religare Securities Ltd. “TOI has huge financial muscle.”
Deccan Chronicle Holdings Ltd, which made its entry into Chennai some years earlier, already claims to have eaten into The Hindu’s circulation in the city. Deccan Chronicle is India’s largest listed media house with a capitalization of Rs3,695 crore.
Meanwhile, news of the discussions with Fairfax Media for a stake acquisition in The Hindu has trickled down to many of the group’s journalists, triggering, among some, fears of job cuts. The Hindu and its group publications employ about 3,000 people.
Employee union secretary B. Arasu, who has been with The Hindu for 25 years, said firmly that any equity deal in the parent company “will not result in job cuts.” The union is backed by the ruling Dravida Munnetra Kazhagam party in Tamil Nadu.
Saurav Gurnurkar, a media analyst at Mumbai-based Kotak Securities Ltd, said the news sector will see more deals in the mid-term, as independent media firms would have to raise capital to fight competition as media conglomerates with deep pockets continue to diversify and expand operations. “India is a unique market where the print media sector is witnessing strong growth unlike in other global markets,” said a media analyst with a foreign brokerage, who did not wish to be named. The print media sector will witness a compounded annual growth rate of 17-18%, he said.